Financial and Performance Benchmarks for the Heifer Operation

Financial and Performance Benchmarks for the Heifer Operation

Normand St-Pierre, Ph.D.Normand St-Pierre, Ph.D.

Department of Animal SciencesDepartment of Animal Sciences

The Ohio State UniversityThe Ohio State University

(614) 292-6507(614) 292-6507

st-pierre.8@osu.edust-pierre.8@osu.edu

Benchmarks: a PARADOXBenchmarks: a PARADOX

Very useful for comparing yourself to your Very useful for comparing yourself to your peers.peers.

But can just as easily lead you in the wrong But can just as easily lead you in the wrong direction.direction.

BenchmarksBenchmarks

EmpiricalEmpirical Survey of producersSurvey of producers

Who – Representative sampleWho – Representative sample Data ValidationData Validation DefinitionsDefinitions

The Chicken and the EggThe Chicken and the Egg

Are the benchmarks driving the producers?Are the benchmarks driving the producers?oror Are Are

the producers driving the benchmarks?the producers driving the benchmarks?

BenchmarksBenchmarks EmpiricalEmpirical Expert-basedExpert-based

AssumptionsAssumptions Says who?Says who? The chicken and the eggThe chicken and the egg

An Expert Benchmark – The OSU BudgetAn Expert Benchmark – The OSU Budget

Feed Costs 3 to 12 13 to 23 3 to 23

Corn $ 45 $62 $ 107

Soybean Meal $ 24 $ 31 $ 55

Dical phosphate $ 6 $ 6 $ 12

Salt $ 2 $ 2 $ 4

Hay $128 $179 $307

Corn Silage $ 62 $ 86 $148

TOTAL $267 $ 366 $633

An Expert Benchmark – The OSU BudgetAn Expert Benchmark – The OSU Budget

Other Variable Costs 3 to 12 13 to 23 3 to 23

Veterinary and Med. $ 4 $9 $ 13

Utilities $ 6 $ 7 $ 13

Bedding $ 22 $ 22 $ 44

Misc. and Supplies $ 7 $ 8 $ 15

TOTAL $39 $ 46 $85

An Expert Benchmark – The OSU BudgetAn Expert Benchmark – The OSU Budget

Total Costs 3 to 12 13 to 23 3 to 23

Feed $ 267 $366 $ 633

Other Variable Costs $ 39 $ 46 $ 85

Labor Costs $ 56 $ 67 $ 123

Equipment Charge $ 15 $ 16 $ 31

Building Charge $ 37 $ 41 $ 78

TOTAL COSTS $ 414 $ 536 $ 950

QuestionsQuestions

What if you feed more corn silage or haylage as What if you feed more corn silage or haylage as opposed to hay?opposed to hay?

An Expert Benchmark – The OSU BudgetAn Expert Benchmark – The OSU Budget

Feed Costs 3 to 12 13 to 23 3 to 23

Corn $ 45 $62 $ 107

Soybean Meal $ 24 $ 31 $ 55

Dical phosphate $ 6 $ 6 $ 12

Salt $ 2 $ 2 $ 4

Hay $128 $179 $307

Corn Silage $ 62 $ 86 $148

TOTAL $267 $ 366 $633

QuestionsQuestions

Where are the dead heifers?Where are the dead heifers?

An Expert Benchmark – The OSU BudgetAn Expert Benchmark – The OSU Budget

Total Costs 3 to 12 13 to 23 3 to 23

Feed $ 267 $366 $ 433

Other Variable Costs $ 39 $ 46 $ 85

Labor Costs $ 56 $ 67 $ 123

Equipment Charge $ 15 $ 16 $ 31

Building Charge $ 37 $ 41 $ 78

TOTAL COSTS $ 414 $ 536 $ 950

QuestionsQuestions

What year?What year?

Financial Benchmarks:The Sweet 16

Financial Benchmarks:The Sweet 16

16 measures of profitability, solvency, liquidity, 16 measures of profitability, solvency, liquidity, repayment capacity and financial efficiencyrepayment capacity and financial efficiency

3 Solvency ratios:3 Solvency ratios: Debt to Asset ratioDebt to Asset ratio Debt to Equity ratioDebt to Equity ratio Equity to Asset ratioEquity to Asset ratio

The Sweet 16The Sweet 16 3 Solvency ratios:3 Solvency ratios:

Debt to Asset ratio (D/A)Debt to Asset ratio (D/A) Debt to Equity ratio (D/E)Debt to Equity ratio (D/E) Equity to Asset ratio (E/A)Equity to Asset ratio (E/A)

However, However, Asset = Debt + EquityAsset = Debt + Equity If D/A = 0.40 If D/A = 0.40 thenthen

E/A = 0.60E/A = 0.60 andand D/E = 0.66D/E = 0.66

So why use three ratios when one captures 100% of the available So why use three ratios when one captures 100% of the available information?information?

Cost of Raising ReplacementsCost of Raising Replacements

Items 0-7 w 6.5 m 16.5m 23.5m Total

Housing ($) 3 14 31 22 70

Feed ($) 40 165 180 268 653

Bedding ($) 5 33 7 3 48

Labor ($) 32 31 60 41 164

Equipment ($) 0 39 56 44 139

Breeding, reg. ($) 100 40 140

TOTAL 180 282 374 378 1214

Cost of Raising ReplacementsCost of Raising Replacements

Items 0-7 w 6.5 m 16.5m 23.5m Total

Total for period ($) 180 282 374 378 1214

Mid-Point Cum. ($) 140 321 649 1025

Death Factor 1.03 1.02 1.02 1.01

Death Cost ($) 4 6.5 13 10.5 34

Total with death ($) 184 288 387 388 1248

Future value1 222 340 427 400 1389

110% annual discount rate

Land

Land Price and Feed CostsLand Price and Feed Costs

Land Value ($/acre) Corn Silage Yield (t/acre) Hay yield (t/acre) Net Interest (%)

$ 1,000 16 4.5 8

$ 4,000 16 4.5 6

Corn Silage (IN) $/ton 22.5 32.5

(OUT)$/ton 25 36.11

Hay ($/ton) 100 153

Land Price and Feed CostsLand Price and Feed Costs

Land Value ($/acre) Corn Silage Yield (t/acre) Hay yield (t/acre) Net Interest (%)

$ 1,000 16 4.5 8

$ 4,000 16 4.5 6

Corn Silage, $/heifer + $100

Hay, $/heifer + $120

Sub-Total + $220

Interest (@8%) + $ 17.50

TOTAL + 237.50

Benchmarking Nutrient CostsBenchmarking Nutrient Costs

Benchmarking Nutrient Costs (ADG = 0.8 kg/d 1.75 lb/d)Benchmarking Nutrient Costs (ADG = 0.8 kg/d 1.75 lb/d)

Weight (kg)

Days ME Mcal/d

RDP g/d

RUP g/d

150-175 32.25 9.6 407 261 175-225 62.5 11.9 505 233 225-275 62.5 14.1 597 207

275-325 62.5 16.2 685 183 325-375 62.5 18.2 769 162

375-425 62.5 20.1 850 142 425-475 62.5 24.5 1038 448

475-525 62.5 26.4 1119 432 525-575 62.5 28.3 1197 418

575-600 31.25 30.1 1274 407

Benchmarking Nutrient CostsBenchmarking Nutrient CostsWeight kg

ME $/d

RDP $/d

RUP $/d

Min $/d

TOT $/d

150-175 0.496 -0.012 0.174 0.05 0.613 175-225 0.615 -0.016 0.156 0.05 0.720 225-275 0.729 -0.018 0.138 0.05 0.823

275-325 0.838 -0.021 0.122 0.05 0.922 325-375 0.941 -0.024 0.108 0.05 1.016

375-425 1.039 -0.026 0.095 0.05 1.106 425-475 1.267 -0.032 0.299 0.05 1.420

475-525 1.365 -0.034 0.289 0.05 1.511 525-575 1.463 -0.037 0.279 0.05 1.603

575-600 1.556 -0.039 0.272 0.05 1.690

ME = $0.052/Mcal; RDP = $-0.031/kg; RUP = $0.303/kg

Benchmarking Nutrient CostsBenchmarking Nutrient Costs

Weight kg

Days Total $d

Total $/period

% of TOTAL

150-175 32.25 0.613 19.15 3.0 175-225 62.5 0.720 45.01 7.0 225-275 62.5 0.823 51.45 8.0

275-325 62.5 0.922 57.61 9.0 325-375 62.5 1.016 63.51 9.9

375-425 62.5 1.106 69.12 10.8 425-475 62.5 1.420 88.76 13.8

475-525 62.5 1.511 94.44 14.7 525-575 62.5 1.603 100.17 15.6

575-600 31.25 1.690 52.81 8.2 TOTAL $ 642

Benchmarking Nutrient Costs400 kg, 880 lbsBenchmarking Nutrient Costs400 kg, 880 lbs

Gain kg/d (lbs/d)

ME Mcal/d

RDP gd

RUP gd

TOT $/d

TOT $/kg

0.5 (1.10) 18.0 760 86 0.983 1.966 0.6 (1.32) 18.7 791 105 1.024 1.707 0.7 (1.54) 19.4 821 124 1.065 1.522

0.8 (1.76) 20.1 850 142 1.106 1.382 0.9 (1.98) 20.7 878 159 1.141 1.268

1.0 (2.20) 21.4 905 176 1.182 1.182

ME = $0.052/Mcal; RDP = $-0.031/kg; RUP = $0.303/kg

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Question the AuthorityQuestion the Authority

Who pays for the dead animals?Who pays for the dead animals? What is the value of time?What is the value of time? What is the relationship between the different What is the relationship between the different

elements of the benchmarks?elements of the benchmarks? Is there a free lunch?Is there a free lunch?

The End